The number of new home loans approved in March fell to record lows due to the effects of the floods and the official Reserve Bank rate rise in November, which was followed by the big ranks lifting their rates higher again.
According to the Australian Bureau of Statistics, the number of home loans approved in March fell 1.5 per cent to a seasonally adjusted 44,968 – the lowest level since February 2001.
JP Morgan economist Ben Jarman told www.news.com.au that the number was soft and the housing sector was weak throughout the March quarter.
There were a couple of things going on that we can obviously point to in Queensland, so the numbers are fairly soft,” he said.
“In January, we had the Queensland floods and pushed down approvals nearly 15 per cent and the numbers have failed to come back from that.”
“It does seem the Queensland floods are exhibiting a fairly long-lasting drag on that market.”
There was a lot of home refinancing activity after the surprise Melbourne Cup rate rise of 0.25 per cent to 4.75 per cent, which was then trumped by the banks.
“That rate hike in November was super-sized by the banks,” he said.
“So you’ve got a couple of elements that are contributing to the weakness, but even if those factors start to fade, there will still be some pretty intense headwinds for the sector.
“You’ve got borrowing rates now above average and the prospect of more rates hikes to come. So we expect the housing data to be pretty subdued for some time to come.”
Mr Jarman said he expected the RBA to next hike in August.
“This will give RBA officials time to look through the GDP (Gross Domestic Product) report, which we’ll get in a couple of weeks, which we expect will be quite soft.
“The RBA will wait a couple of months to look through the GDP data and get one more inflation print just to make sure the last elevated print wasn’t an anomaly.”